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Officials overseeing the Thrift Savings Plan should be sure they are prepared to handle an increased volume of transactions in the event of a major market plunge, members of the retirement plan's board said at a meeting Monday.

TSP officials noted that following the stock market drop in late February, about 10 percent of participants with investments in the 401(k)-style plan's International (I) Fund made changes. Though the market recovered quickly, board Chairman Andrew Saul said the plan must be prepared to deal with a major influx of transactions.

"We have to make sure we are building ourselves up structurally for increased volume and increased participants," Saul said. "God forbid that we have a major world event...we really have to plan for this."

Officials noted that the system that processes the transactions normally operates on about three-fifths of its capacity. Should the market fall significantly, the system could be turned on to full capacity, allowing it to handle approximately four to five times the volume of transactions. Any transactions that exceeded that amount could be delayed.

Saul recommended that TSP officials assess the situation and issue a report, and that the issue be discussed in-depth at next month's board meeting.

Meanwhile, new TSP Executive Director Greg Long said plan assets are now up to $213 billion and are increasing by $10 billion per quarter. TSP also has more than 3.7 million participants, Long said.

"We said we'd be a $400 billion plan in three years, but I think we're going to be a $400 billion plan in two years," Saul said. "You really have a fund that could grow at least $50 billion a year."

During the past month, military service members' participation in the plan increased from 24.3 percent to 24.6 percent, Long said. He added that TSP officials will receive data from the Defense Department next month on military service participation during the past year.

COMMENTS

• It's prudent planning on the Board's part to protect against increased violatile market moves, however, my GREATER concern is processing times (2days to move money)in two days the more risky funds could have huge move downs. I suggest that the board relook processing times. On main street the SELL/BUY is INSTANT!...consider limiting the number of instant moves per day/week/month (say 2 moves max per day/week/month), but allow it at some level. Further, if the board is concerned about people day trading their account, I say its not possible if you limit the number of instant moves in a reasonable way. Stephanie Gales Posted August 21, 2007 9:01 AM
• As I’ve said before, IMHO, it seems the intent of the L Funds may be exactly opposite of the way people handle their retirement funds. Perhaps it is the difference between the active and the passive participants, but most of the folks I’ve spoken with, that are a few years from retiring and have a significant balance in their FERS, feel foolish if they don’t try to capture some of the higher returns available in the more volatile stock funds. Personally, I prefer to practice “fire and forget” and use allotments extensively but I saw no L Funds that came anywhere near the S and I Fund returns. I saw the I Fund pulled in 37.81% vs. the L 40 Fund return of 23.53% since Jan 06. I felt that I was missing my mark in potential returns. Now I manage my own allocations, try to avoid the pitfalls of trend-following, and am exceeding all the stock returns save the “I” over the 5 quarter period and the “I” and “S” for the 1st quarter, 2007. I do not feel unique. Many of us are in FERS of which the greater component in our retirement is the TSP. I see most of my co-workers in striking distance of retirement grasping for those big returns and gambling that they can jump in for the gains and out before substantial losses. If Greenspan’s prediction comes to fruition, then we will see even more fund gyrations. Therefore, preparations for such swings seem only common sense. Yes, the concept of Dollar-Cost-Averaging, allows us the safety of knowing we can buy low to, hopefully, later sell high. But basic math tells us that if we can stave off the loss of a few cents per dollar in our sunk cost funds, shaving off a 10¢ loss in savings in a 20¢ correction, then every penny saved is a penny earned. Part of the goal of the TSP is to educate their clients in the fund and market forces in general. As more of us are educated, more of us will wish a hand in guiding our fate. So saying, as the retirement crisis looms, I think we must be prepared for the worst monetary movements following market corrections. I only hope there isn't a stampede that becomes self-sustaining. Tip off GovExec.com reader Posted April 23, 2007 8:53 AM
• Taxpayer, After the numerous complains I’ve heard from the floor, why would we wish to bust up the largest retirement fund in the US and give up the few advantages we have such as our economies of scale? Why segregate our population and experiment with a proven system without need? Why create two new fund groups and pay more for expenses? I did try to follow your thought process and actually considered the segregation of the more stable population from the more volatile but couldn’t figure out who was who. Folks say the young love to take chances and risks. That may be, but young parents struggling to establish a career with less funds and experience are less inclined to roll the dice and squander their future. Older folks, approaching retirement are thought to be more conservative in their choices, but they also have the most disposable income and experience in perceiving the ways of the market and economy and often comprise those gamblers. So who is to say which population is the more risky? I wonder as to the demographics of TSP participation. Are those beginning their career more likely to choose the stock funds for gains over the long run? Or are they nervous and prefer stability? Are the oldsters the sedate sages or gamblers on a roll? Have there been any such studies? Would it be possible to see if the L Funds are actually being used by the target populations they were created to serve or may we find out the demographics are actually reversed? What the TSP board is doing here is exactly what we want them to do. Taking precautions before its too late. The system should have been sized for this capacity well before. I have no problem with their recent realization as long as they continue in the manner they’ve expressed. So far, this is all part of a well-run automated system. Please remember, if you have a proven system and feel the need for change, while the thought may cross your mind to do everything at once that’s normally a recipe for disaster. One change at a time, with a pause to ensure the change has taken, will work, and doesn’t cause more trouble is the best way to go. Tip off GovExec.com reader Posted April 18, 2007 10:07 AM